France Demands Centralized EU Crypto Oversight - Potential Block Looms Over Industry

European crypto firms face regulatory uncertainty as France pushes for centralized control. Paris argues fragmented national supervision creates regulatory arbitrage opportunities—because nothing says 'financial innovation' like adding more bureaucracy.

The proposed framework would establish a pan-European regulator with authority to approve or reject crypto operations across member states. Critics warn this could stifle innovation and drive startups to more flexible jurisdictions.

Industry players brace for potential compliance headaches while traditional finance veterans nod approvingly—after all, if you can't beat disruptive technology, you can always regulate it into submission.

France Pushes For Centralized Crypto Oversight

According to an exclusive coverage made by Reuters on Monday, the urgency of this move stems from concerns that under the EU’s new regulatory framework, known as the Markets in Crypto-Assets (MiCA) regulation, crypto companies are gravitating towards jurisdictions with more lenient licensing processes.

Barbat-Layani emphasized that there are significant inconsistencies in how national regulators are applying the new rules, raising alarms about the potential for inadequate supervision of cross-border firms.

In a coordinated effort, France has joined Italy and Austria in advocating for ESMA to assume supervisory responsibilities over major crypto firms. This was outlined in a position paper shared with Reuters, highlighting a collective concern about the regulatory landscape.

The head of France’s financial watchdog warned that France WOULD not shy away from employing what she termed an “atomic weapon”—the possibility of challenging the validity of licenses granted by other EU member states. 

This could disrupt the established “passporting” mechanism that allows companies approved in one country to operate throughout the European Union. 

Barbat-Layani also pointed out that some crypto platforms are engaging in “regulatory shopping,” seeking out jurisdictions with less stringent requirements to gain favorable licenses. 

France And Allies Seek Major Changes For MiCA Rules

The call for enhanced oversight comes after a review by ESMA, which found that certain national regulators, like Malta, faced scrutiny for their licensing processes. In some cases, the review indicated insufficient risk assessment when granting licenses to crypto firms. 

As part of this ongoing transition, crypto companies are in the process of applying for MiCA licenses, with jurisdictions like Luxembourg and Malta already granting approvals to prominent platforms such as Coinbase (COIN) and Gemini (GEMI). 

However, the French, Italian, and Austrian regulators are advocating for revisions to MiCA that would impose stricter rules on crypto activities outside the EU, enhance cybersecurity measures, and refine how authorities manage new digital asset offerings.

France has consistently championed the idea of expanding ESMA’s regulatory powers, a sentiment echoed by ESMA’s head, Verena Ross. However, this proposal faces resistance from certain EU member states, highlighting the challenges ahead in establishing a cohesive regulatory approach for the digital asset market. 

Featured image from DALL-E, chart from TradingView.com